Economic Crime (Transparency and Enforcement) Bill

Debate between Lord Clement-Jones and Baroness Smith of Basildon

Committee stage
Monday 14th March 2022 Lords Chamber

[Lord Clement-Jones (LD)]

This amendment would provide limits on costs orders in relation to all civil recovery proceedings brought by an enforcement authority under Part 5 of the Proceeds of Crime Act 2002, which enables law enforcement authorities to recover property obtained through unlawful conduct without the evidentiary difficulties of securing a criminal conviction. The effective exercise of these powers is essential if civil recovery is to fulfil its purpose of deterring criminals who are as concerned, if not more concerned, with losing their assets than they are with losing their liberty.

The current costs regime for civil recovery is fragmented, with different rules applicable in different courts. I am very well aware that on the other side of the aisle are some of the experts in this area. Civil Procedure Rules apply in the High Court, the Court of Appeal and county courts. Rule 44.2 of the CPR sets out the general principles in civil proceedings that costs follow the result—that is, the winner pays the loser’s costs, but the court retains discretion to make a different order and determine the amount of costs to be paid. The principles relevant to the exercise of judicial discretion to award costs in civil proceedings in the Crown Court and magistrates’ courts have evolved over time through case law.

In civil proceedings brought by public authorities in the Crown Court and magistrates’ courts, the approach to costs is reflected in the so-called Perinpanathan principle. This includes civil recovery proceedings brought under Part 5 of the Proceeds of Crime Act 2002. In the Perinpanathan case, the Court of Appeal held that, where a public authority is unsuccessful in bringing an application, the default position or starting point is that no order for costs is made. However, a successful private party may be awarded costs if the conduct of the public authority justifies it. As a result, enforcement authorities will rarely have to pay costs when pursuing civil recovery in the magistrates’ court, but are exposed to significant costs in High Court proceedings, where the general rule is that the unsuccessful party pays the legal costs of the successful party.

Clauses 47 and 48 reflect a recognition that significant and deterring costs have made enforcement authorities reluctant to utilise unexplained wealth orders in their current iteration. Only nine UWOs, relating to four cases, have been obtained by the National Crime Agency since this investigative tool was introduced in January 2018. The unsuccessful UWO application in the Aliyev case, which I mentioned at Second Reading, left the NCA facing £1.5 million in legal costs.

Limiting the liability of enforcement authorities to pay costs in UWO proceedings is a welcome step, but it is a piecemeal intervention which does not address the chilling effect of adverse costs orders in civil recovery proceedings more broadly. This proposed amendment seeks to ensure consistency of approach in civil recovery proceedings so that adequate cost protections encourage enforcement authorities to put their economic crime-fighting tools to effective use. At present, the prospect of prohibitively expensive legal costs effectively renders certain assets out of the reach of underresourced law enforcement agencies. We need a new, consistent cost protection regime for law enforcement agencies and regulators under the Proceeds of Crime Act as a whole.

I am very grateful to Spotlight on Corruption for raising this issue and laying the grounds for this amendment. The starting point should be that a law enforcement body or regulator should not be ordered to pay costs where it is unsuccessful in bringing or defending civil proceedings. This would have the effect of each party bearing its own costs. However, the court should retain discretion to depart from this default rule in cases where there is good reason. This could include where the law enforcement body or regulator has acted unreasonably in bringing or defending proceedings and where the interests of justice and fairness would be offended, including where substantial financial hardship is likely to be suffered by the successful party if a costs order is not made.

I very much hope that the Government see the merits of Amendment 90 and of applying it in the same way to Scotland—the notice to oppose the Question that Clause 48 stand part of the Bill would have exactly that effect. I beg to move.

[Baroness Smith of Basildon (Lab)]

My Lords, I will be brief. I have listened very careful to the noble Lord, Lord Clement-Jones, and my understanding is that the Government are seeking to protect the enforcement bodies, such as the National Crime Agency, from the costs of legal action. Clearly, it is important to provide these agencies with an element of cover from being pursued for costs, as they must be free to investigate activities as they see fit and not fear the potential costs of bringing what they believe to be a legitimate case. As we have heard already tonight, the resources available to those being investigated is often hugely significant.

The noble Lord, Lord Clement-Jones, is proposing a much broader approach on this than in the government clauses, applying the principle to all civil recovery proceedings under Part 5 of the Proceeds of Crime Act 2002, not just to unexplained wealth orders. The Bill is quite narrow in scope, and the Government may not see fit to put this into this legislation, but I hope that there is an opportunity to debate this further. I would be grateful if the Minister could say something not just on whether it fits into this Bill but on the Government’s general approach to the issue.